On the verge of recapturing the House of Representatives on Nov. 2 but with the Senate still looking out of reach, President Barack Obama’s opponents and their smaller-government ideas are facing a scenario of probable political inertia even as they ride a wave of voter discontent and anger at Washington incumbents.

Time and again on the campaign trail this year, Republicans have pledged to repeal the new health-care law, end federal bailouts, and extend as many tax cuts as possible to revive the sluggish economy and recoup millions of American jobs decimated by the recession.

But accomplishing those things and more will be much more complicated if current election projections pan out when voters go to the polls.

“I don’t think there’s going to be much room to compromise on high-profile issues that resonate with each party’s base,” says Henry Olsen of the American Enterprise Institute.

Analysts aren’t optimistic that Congress and Obama will be able to work together after Nov. 2 on big-ticket items like health care, energy and Wall Street reform. But they do see room for agreement on smaller-bore issues such as certain tax cuts or trade deals.

Right now, pollsters’ numbers point to pure gridlock in Washington after voters cast their ballots in all 435 House races and 37 Senate elections.

Analysts predict that Republicans will take as many as 60 seats in the House, exceeding the 39 needed to recapture the chamber for the first time since 2006. But they also foresee between 6-9 Republican pickups in the Senate, which would leave the party short of a simple majority (to say nothing of a filibuster-proof super-majority of 60.) A Republican House coupled with a Democrat-led Senate and a Democrat in the White House is a recipe for stalemate.

That won’t stop Republicans from trying to push through campaign pledges including tossing out the health-care law and scrapping the remaining money from Obama’s $814 billion stimulus package. But Democrats will push back just as hard.

“The odds are it’s going to be a game of defense and missed field goals,” says Ethan Siegal of the Washington Exchange, which advises institutional investors and businesses about the impact of public policy on capital markets.

Siegal is more optimistic that a Republican House would play ball with a Democratic Senate and White House over smaller issues including corporate tax cuts. Obama himself said he was open to looking at those recently. Senate Republican Leader Mitch McConnell has also suggested that his party could work with Democrats to enact trade agreements with South Korea, Colombia and Panama.

Eye on 2012

2011 will be dominated by fiscal issues, Siegal believes, including dealing with the Bush-era tax cuts if they’re not extended in the lame-duck session scheduled for after the midterm elections. And meeting Republicans halfway on some issues would be smart politics for Obama, the analyst contends.

“If he wants to get reelected in 2012, he has to move to the middle and do some deals,” says Siegal.

Republican pollster Whit Ayres says that Republicans can work with moderate Democrats in the Senate if they’re not able to take control of that chamber. He says it’s conceivable that majorities in both parties could agree on killing aspects of the health-care law, such as cuts to the Medicare Advantage program. He also says that Democratic senators can help extend the Bush-era tax cuts -- but agrees that much is up to the veto-wielding Obama.

“If [Obama] adjusts as effectively as Bill Clinton adjusted after 1994, they can get some things done for the good of the country,” said Ayres. And if Obama doesn’t move the Republicans’ way?

“It’s going to be gridlock city.”

Working with the newly elected Republican Congress, Clinton enacted major legislation including welfare reform in 1996. After the 1994 “Republican Revolution,” Clinton had little choice but to move to the right, with Republicans firmly in control of both chambers of Congress.

But a divided Congress may not compel Obama to compromise -- especially if he wants to maintain his Democratic base as he keeps one eye on the next presidential contest.

“Both parties’ leaderships and both parties’ bases are looking to 2012,” said Olsen.

Deficit details

Both Republicans and Democrats will also quickly need to define what spending cuts they’d like to see to help tackle the government’s red ink. The deficit stood at $1.3 trillion at the end of fiscal 2010, the second-highest amount on record.

But so far, Republican candidates haven’t offered many specifics. A commission tasked by Obama with offering solutions to reduce U.S. deficits will report only after the elections. Members of both parties may soon have to mull unpopular measures including raising the retirement age to prolong the life of Social Security, or cutting defense spending.

To be sure, Democrats have plenty of unfinished business that they want to act on. But without big majorities Obama’s party will have to try to restrict itself to passing smaller initiatives such as tax breaks for research and development. Major bills like the cap-and-trade effort to control greenhouse gases would go nowhere with a bigger Republican presence in Congress.

As the campaign draws to a close some key Senate races are tightening up, raising the possibility that Republicans won’t make the gains forecast by analysts. Democrats like Rep. Joe Sestak in Pennsylvania and Sen. Michael Bennet of Colorado are matching their Republican opponents in some polls.

But other surveys point to Republicans maintaining their wave and scoring big victories on Nov. 2. In the last Associated Press-GfK survey of likely voters before Election Day, Republicans win voters’ confidence over Democrats on handling the economy, taxes, job creation, the deficit and other issues. Likely voters are divided on which party would best handle Social Security and health care.

If Republicans do win a majority in the House and make at least substantial gains in the Senate, they will be under enormous pressure from tea-party conservatives to live up to their promises to cut government spending and roll back some of Obama’s accomplishments. Former Alaska Gov. Sarah Palin said recently that voters may ask “Why not a third party?” if established Republicans don’t follow through with their promises.

And accomplishing little would spell trouble for Republicans down the road, suggests Isaac Wood of the University of Virginia’s Center for Politics.

“They may find themselves in a situation where they’ve overpromised and under delivered.”

Robert
Schroeder

Robert Schroeder is the White House reporter for MarketWatch. Follow him on Twitter @mktwrobs.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.